hw22_23sol

hw22_23sol - Problem 22 A. Incremental revenue $113,150...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Problem 22 A. Incremental revenue $113,150 Incremental expenses: Driver (64,800) Operating (19,400) Depreciation Depreciation (12,560) $84,800 - $22,000 Income before taxes 16,390 5 Income tax expense (5,737) Net income 10,654 Add depreciation 12,560 Operating cash flows $23,214 B. Investing cash flows are all cash flows related to long term assets: Purchase of limo $(84,800) Residual value 22,000 All costs necessary to get the asset ready to use [$80,000+(80000*6%)] are included as part of the acquistion cost. 1-1-10 2011 2012 2013 2014 Annual operating cash flows $23,214 $23,214 $23,214 $23,214 Cost to buy machine $(84,800) Salvage value Net cash flows $(84,800) $23,214 $23,214 $23,214 $23,214 CF0 C01 C02 C03 C04 C. Time line: D. NPV $20,697 This investment will earn the company a return on its cash flows that exceeds its minimu IRR 16.77% This investment will earn the company roughly 16.77% return on its cash flows during ea E. This investment is expected to earn about 16.77 cents of cash flows out of every dollar of assets inveE....
View Full Document

This note was uploaded on 07/09/2011 for the course ACG 2071 taught by Professor Tanner during the Spring '11 term at UNF.

Page1 / 4

hw22_23sol - Problem 22 A. Incremental revenue $113,150...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online